This content is from: Local Insights


The Ministry of the Economy and Finance's Decree No 47 of January 31 2003, which recently entered into force, has substantially amended Ministerial Decree No 228 of May 24 1999 that regulates common investment funds. The most remarkable amendments are those relating to the discipline of real estate investment funds, under a new Article 12-bis.

According to Article 12-bis, real estate investment funds may only be established in closed-end form. According to rules laid down by the Bank of Italy, a minimum of two-thirds of their assets must be invested in real estate, immovable rights and shares in real estate companies. This limit may be reduced to 51% if at least 20% of the fund's assets are invested in securitization transactions backed by real estate assets, immovable rights or claims guaranteed by real estate mortgage. These investment limits must be achieved within 24 months of the fund starting to operate.

The subscription of shares in a real estate investment fund or in any sub-funds thereof may be made, if provided for in the fund's by-laws and articles of association. Such subscriptions must be made within 18 months of the publication of the relevant fund's prospectus. A substantial amendment introduced by Decree No 43 relates to additional issues of shares in the fund or its sub-funds subsequent to the date of its establishment provided that - in the original text of the Regulation and as is customary for closed-end funds in general - the subscription of shares in such funds was allowed exclusively on the date of establishment. The regulation of the fund must provide details for the modalities of any additional issues of shares subsequent to the first one.

New rules are also provided by Decree No 43 in connection with investment and managing policies applicable to real estate investment funds. Article 12-bis provides that real estate assets belonging to the fund may be sold, purchased or conferred to or by any holder of shares both in the asset management company in respect of the fund (the SGR) or in other companies of the relevant group to which the SGR belongs provided that: (i) the value of the asset to be sold, purchased or conferred does not exceed 10% of the value of the fund; (ii) the overall amount of transactions finalized, directly or indirectly, with shareholders of the SGR does not exceed 40% of the value of the fund; and (iii) the overall amount of transactions finalized, directly or indirectly, with shareholders or other persons of the group does not exceed 60% of the value of the fund.

Further restrictions are set out in Article 12-bis, including the need for a resolution by the SGR specifying the profitability, for the real estate fund and the investors, of any transactions to be finalized as mentioned above and which will have to be taken on the favourable opinion of the regulator in respect of the fund.

Before the recent amendments, the redemption of shares in a real estate fund was contemplated by the Regulation exclusively at the maturity date of the fund or on request of the shareholder. Decree No 43 has amended Article 14 stating that, whenever additional issues of shares are envisaged in the fund's regulation, there must be the option for the shareholders to apply for the early redemption of their shares.

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